Moisson Partners Inc., (MPI), is not an auction site or a business broker. We are a consulting firm that employs research, and search techniques to find and vet advisors, books, and practices. We encourage clients to engage both attorneys and CPAs during the course of any purchase. We levy a fee as finder and consultant to search for, surface, vet, and bring to the table interested parties. We work to get the firm for our clients at a reasonable price. Pursuant to this objective, our recruiting and consulting fees are not based in any way on the stock or sale price, as you will discover below.
In today’s markets, with broker-dealers and RIAs acquiring and being acquired, and the average age of advisors in the mid-50s, there are a lot of places where a seller might go to try and sell his or her practice. We encourage a buyer to look at all of them. With that said, we believe our approach is best for the advisors who are our clients; typically, the buyers.
When a seller posts his or her firm on one of the many auction websites, the owner will get multiple advisors looking at it. FP Transitions, one of the better auction sites, estimates that there are 50 buyers for every one seller on their auction site. This fact will naturally drive the price up, to say nothing of the unpalatable terms that might be required.
National statistics suggest that as many as 40% of advisors will never sell their practice when they retire. They will simply work less over time, and let the practice decrease in value through attrition, as clients look for another advisor. These are the ones we want! We want to contact them before the attrition goes too far; many time before they decide to retire, and offer them a fair price for their book. We want to assure them that their clients will be cared for and that should something happen to them, their families will benefit in an equitable manner. For our clients, we want to engage them before the auction process drives up the price and creates undesirable terms. To do this, we follow our own proven Process, which is very similar to the one we employ when we are searching for a Successor or producing advisor.
As mentioned above, surfacing books, and practices is in many ways similar to engaging an advisor or producer to join an established firm. We are looking for a book, practice or skill set that will either match or expand the client base of our client, and/or create the opportunity to enter additional markets. Either way, we are looking for clients that will fit the client’s investment style, product set and marketing model. We are looking for a practice that will transition easily, (recognizing that transition is never seamless); not causing undue disruption to the manner in which our client partner’s firm is run. Most important, we are looking for an asset base and cash flow that can pay for itself in a short period of time, either from the client base itself or through increased market opportunities.
The Empathetic Buyer™Process
What is The Empathetic Buyer™?
For most sellers, the sale of their business represents the culmination of their life’s work, the handing over of their clients and friends to another steward, and a change in their life from trusted advisor, to former trusted advisor. This dynamic sets up a situation in which an advisor-buyer who is not willing to be sympathetic, or at least empathetic, with what the seller is experiencing can easily say or do the wrong thing at any point along the Process.
This can affect the transition at best, and the sale at worst.
Given these facts, we employ our trademarked process, The Empathetic Buyer™Process, designed to ensure that buyers and sellers alike get what they want from the transaction and the subsequent transition.
Your Ideal Target - We have to first define your ideal target. Your target is defined by how you envisage it fitting in with your practice, your ability to buy it, and your ability to service the clients.
• What are you looking to spend? How will you finance?
• Where do you want the target located?
• How many clients can you take on? How much in AUM?
• What percent of the revenue do you want in recurring revenue?
• What is your charge for fees? (You do not want to have to convince every new client to double the fees in order to make it profitable.)
• What markets are you after? (Retirees, business owners, corporate executives, 401k plans, etc.)
• What terms are you looking for?
• What are your minimum client assets sizes?
• Do you want the seller to remain with the book for any period of time during the transition? (You do!)
• And a lot more… the key is to model how a book will affect your bottom line.
Value Proposition Development - As has been discussed, there can be as many as 50 buyers to every seller in some markets. This is particularly true in major metropolitan areas. Given this fact, the buyer must make a very good case that he/she is better positioned to acquire than others in the market area. The ability to fund the Acquisition/Merger and to service the seller’s clients, top the list of requirements, but there are others to consider. We help our clients craft a message and approach to put them in the best possible position to stand out as a firm or advisor that the seller will feel comfortable with. Keep in mind that for many advisors, the sale of the business and relationships they have spent a lifetime accumulating and nurturing is as much as 70% emotional and only 30% financial. Our job is to navigate both buyer and seller through the issues and it starts with a compelling Value Proposition, (VP).
The VP is closely related to the criteria of the buyer. Buyers must offer evidence to firms that fit their criteria that they can answer two critical questions that every seller has:
• Does this advisor/firm have the ability and the intention to pay a reasonable price, using acceptable terms?
• Will the seller be proud to go to his/her clients, many of which are friends and even family, and tell them that the buyer is his/her choice to be the steward of their accounts going forward?
Setting the Stage - Working with MPI includes an understanding that our client will follow our lead on the Process and communication. Most of our clients are first-time buyers. Working with advisors, (sellers), who are nearing the end of their careers is a very sensitive process. At every stage, there are critical mistakes that almost everyone makes when they have not been through this Process before. While we certainly value the relationship that develops between buyer and seller, we know that there are times when it is better for a third party who the seller sees as his or her advocate to conduct the communication. We are painfully aware that mistakes can be made by anyone, but we ask our clients to allow themselves to benefit from what we have learned over the past 20 years of merger and 10 years of acquisition work. We have seen numerous examples of deals that could have come together if not for the buying advisor saying or doing the wrong thing at a critical time and losing the trust of the seller. This is especially true when we have multiple partners as the buyers, and it is very common during the time period between the Letter of Intent, (Offer) and the Close. There are numerous firms in the market. We submit that it is our knowledge of the market, experience, ability and the willingness to hold the buyer’s hand, (and the seller’s), through the Process that makes MPI worth the investment. With that said, clients benefit most when they are engaged in the MPI Process.
Research Associates Assignment- As part of the engaged assignment, we consign one or more of our Research Associates (RA) to work specifically on identifying potential targets for Acquisition/Merger. RAs work in our offices in Des Moines, IA and Port Washington, NY under the direction of our Managing Partners, Casey and Gavin. Many have industry experience; all have been trained by MPI. We do not contract the work out. Before the assignment is complete, Research Associates will make hundreds of personal telephone calls to create a pool of target Acquisition/Merger owners who will ‘raise their hands’ to be considered. These will eventually be passed to the Managing Partner who conducts the vetting and the rest of the Process.
Research - We identify the potential universe of candidates. We have several databases of advisors, but we also leverage contacts with investment wholesalers, (which we have placed for 21 years), and others who have contact with potential seller/candidates.
• RAs are provided with the criteria and Value Proposition of the client/buyer. The RAs begin by creating a search area, according to the geographic criterion of the client.
• Within the area selected, the RAs will conduct research from data we possess, along with public, and for-fee information, to identify a pool of potential.
• The RAs then contact the owners of these books and practices by telephone, and/or social media to initiate a conversation.
• The RAs conduct basic due diligence and present a truncated version of the client’s Value Proposition in order to encourage the appropriate sellers to speak with one of our Managing Partners. (RAs do not have the client’s name. In order to control the message, only the Managing Partners will have this.)
Due Diligence by Managing Partner - Research Associates present those prospects who show promise to the Managing Partner in charge of the assignment. This is by far the most time intensive and critical of the steps in the Process. Using the criteria of the client/buyer as a guide, we conduct a comprehensive examination of the practice. We analyze the practice to determine cash flow, the number of clients and their nature, the investment mix, and how the advisor found the clients. We are also exploring the value that the advisor is expecting to get from his/her practice. We have developed a required data package, but we will ask for additional data as required by our client.
MPI does not perform formal valuations for a fee, but we do complete this analysis for our client on any firm we see as a potential target. We are also listening closely for signs that a seller may not actually Close.
During this period, we develop a close relationship with both client and the candidate-sellers. We find that ‘holding your hand’ through the Process can be critical to setting the stage for an early success during the transition of clients to your firm. At the same time, the relationship we develop with the seller can reap important benefits to our client, as we understand the candidate’s thought process and they tend to “open the kimono” for us to learn what motivates them and what turns them off.
• We believe that this stage is where assignments succeed or fail. Therefore, we are adamant that clients follow our lead from this point forward.
Presentation - We present the top Acquisition/Merger targets to our client-partner, providing them with comprehensive background and analysis on each of our selections. It is our charge to be both consultant and confidant as the client decides which firm best fits the needs of his/her firm. We set meetings, prepare clients and potential sellers, debrief all parties after meetings and assist in the preparation of Letters of Intent, LOI, (offers). We try to get both firm owner and Acquisition/Merger/target on the same side of the table, looking at the situation to see if there is enough common interest to move forward. Again, the data on the answers to all of your questions fall to us as your partner.
This period is about working with buyer and seller to align the needs of each participant. We do not want to make an offer, (LOI), that will be declined; we rarely do. At this point we are looking for the common ground between the buyer and seller that will energize both to both a Close and the subsequent transition. Remembering that the transition is the critical part of the transaction for the buyer, it is critical to find the common ground.
Letter of Intent –Offer - The groundwork begins back in the Research phase, and continues throughout the process. We want everyone’s eyes wide open; communication is a key to success, as is transparency. We often develop suggested language for LOIs and Partnership Agreements, (of course, these are subject to legal and compliance approval). When logistically possible, we will join the client to present the LOI to the buyer.
The seller’s reaction to the LOI, (even their level of enthusiasm), will tell us if this person is actually going to Close. The time period between the LOI and the Close is the most sensitive time for the seller. The transaction becomes real for the seller in a way that it has not before. He or she will go from trusted advisor to former trusted advisor. This is extremely unsettling for many advisors; even those who are committed to selling. During this period a first-time buyer, (even a veteran), can easily kill a deal by saying the wrong thing. It is often our Managing Partner’s relationship with the seller that is the best barometer for the attitude of the seller. At this point we are looking for agreement on both sides as to the elements of the Definitive Agreement.
Close - While we are looking for an agreement to go forward, there is almost always some back and forth on details of the LOI. It is MPI’s job to determine what needs to be in the Definitive Agreement and to communicate this with buyer and seller so that they can recount it to the attorney that will write the Agreement to be signed at the Close. We spend an inordinate amount of time with Sellers, who more often than not, need someone to help them deal with the emotional issues of loss and a change in their status as an advisor. It has proven to be a mistake to underestimate the importance of understanding the mindset of sellers up to and including the date of the Close. (We recently closed with a seller who prior to us, had considered and moved forward to various degrees with 11 buyers.)
Follow-up - After the Close, we work with both the client and seller to assure a smooth transition. By this time, we have developed a close, trust-based relationship with the seller. This can be very helpful in the early stages of an Acquisition/Merger transition.
While a great deal of preparation has been completed prior to the Close, it is now critical for the transition to be completed in an orderly fashion. It is MPI’s job to keep the communication lines open between buyer and seller in order to recognize and mitigate issues and challenges that arise. In keeping with our own principle that it is all about the relationship, not the transaction, we want to insure that both sides benefit in the manner anticipated.
Each assignment brings a new challenge. We make adjustments to assist our client/partners in feeling comfortable with their decisions. Even our fee structure is designed to share the incentive to succeed with our clients.